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Rest. 24: manifestation of willingness to enter into a bargain, so made to justify another person in
understanding that his assent to that bargain is invited and will conclude it
Consideration
o Classical
Benefit or detriment
It has value
o Modern
Must be bargained for
Acceptance
o Black letter law: offeror dictates terms of acceptance
o UCC 2-205
An offer by a merchant to buy or sell goods in a signed writing which by its terms gives
assurance that it will be held open is not revocable, for lack of consideration, during the time
stated or if no time is stated for a reasonable time, but in no event may such period of
irrevocability exceed three months; but any
Cases
o (1) Parties
o (2) Subject matter
o (3) Quantity
o (4) Price
o (5) Time of performance
UCC
o If communication specifies the parties and quantity, it is sufficient as an offer
Restatement 24
o Manifestation of willingness to enter into a bargain such that if the other party accepts there is a K
Exists if a reasonable person believes and offer has been made and accepted
o Outward acts and associated circumstance
Restatement 20
o (1) No manifestation of mutual assent to an exchange if the parties attach materially different
meanings to their manifestations and
a) Neither party knows or has reason to know the meaning attached by the other; or
b) Each party knows or has reason to know the meaning attached by the other
o (2) Manifestations of the parties are operative in accordance w/ the meaning attached to them by
one of the parties if
a) That party does not know of any different meaning attached by the other, and the other
knows the meaning attached by the first party; or
b) That party has no reason to know any different meaning attached by the other, and the
other has reason to know the meaning attached by the first party
Preliminary Negotiations
o Restatement 26
Willingness to enter into a bargain is null if the offeree knows or has
reason to know that the offeror intends to bargain until they have
made further manifestation of assent.
o How to spot prelim
Amount of people offer was sent to
Response to an inquiry from the other party
RR v. MH
o Father entered into a surrogacy agreement w/ birth mother. Agreed to pay $10,000
o Rule: A surrogacy agreement is not valid if money was paid to the birth mother
with the purpose of influencing her decision to give up the child.
Lucy v. Zehmer
o Selling of the farm w/ K written on receipt paper
o Rule: The objective, outward expression of a partys intent to be bound in an
agreement, as opposed to that partys subjective mental assent to the
agreement, is all that matters when determining the existence of a valid and
enforceable contract.
Leonard v. Pepsico
o Harrier Jet to a little kid
o Rule: An advertisement does not constitute an offer unless its terms are
sufficiently clear and leaves nothing open for negotiation and an
advertisement intended to be a joke cannot be sufficiently clear.
Is There An Agreement?
(Mutual Assent + Offers)
Invitation to Offer
Cases
Restatement 87
An offer is binding as an option contract if it
Is in writing an signed by the offeror, recites a purported consideration
for the making of the offer, and proposes an exchange on fair terms w/in
a reasonable time; or
Is made irrevocable by statute
o
o
CANNOT BE REVOKED
Eastern Michigan v. Burgesss
Gleason v. Freeman
o Selling Elvis home on eBay
o Rule: Ongoing negotiations evidence a lack of mutual assent to definite terms.
Lonergan v. Scolnick
o Ad for sale of property. Scolnick wrote lonergan for a description of the
property. It was deemed preliminary negotiation
o Rule: If the promisee knows or has reason to know that the promisor does not
intend it as an expression of his fixed purpose until he has given a further
expression of assent, the promisor has not made an offer.
Sateriale v. RJ Reynolds
o Camel Cash
o Rule: An advertisement constitutes an offer when the advertiser, in clear and
positive terms, promised to render performance in exchange for something,
and the recipient of the advertisement reasonably might have concluded that
by acting in accordance with the request a contract would be formed.
Dickinson v. Dodds
o Dickinson was informed by agent that Dodds was intending to sell the property to another.
Is There An Agreement?
(Acceptances)
Acceptance
o Restatement 50
A statement or act that indicates offerees intent enter a deal
Acceptance must take place before revocation
o Mirror Image
(1) Acceptance must be the mirror image of the offer
(2) If terms are materially different then NO K
o Under UCC 2-206
(1) After chance to inspect goods, buyer retains them; or
(2) Buyer fails to make an effective rejection after inspecting goods; or
(3) Buyer does any act inconsistent w/ sellers ownership
o Bilateral Contract
Acceptance is a promise to perform
Offeree MUST inform offeror of acceptance R 56
Hendricks v. Behee
MAILBOX RULE: offer by mail can be accepted as soon as placed in the mailbox
Adams v. Lindsell: Non-delivery of wood
o Unilateral/Option Contract
Offeree must PERFORM
Offerors duty to perform is conditional on full performance R 45
Offeror is liable to offeree for failure to perform, but the offeree cannot be liable for
failure
Offeree is NOT required to notify offeror of acceptance UNLESS it is requested R 54
Carlil v. Carbolic
o Bilateral or Unilateral?
In case of doubt, an offeree has the power to accept by return promise OR performance
Restatement 30
An offer may invite or require acceptance to be made by an affirmative answer
in words, or by performing or refraining from performing a specified act, or may
empower the offeree to make a selection of the terms in his acceptance
Unless otherwise indicated by the language or the circumstances, an offer invites
acceptance in any manner and by any medium reasonable in the circumstances
o Acceptance by Silence R 69
Acceptance by silence is allowed if
(1) Offeree take benefit from offered services with reasonable opportunity to
reject and knowledge that they were offered with the expectation of payment;
OR
(2) Offeror told offeree that acceptance can happen by silence/inaction
(3) When it is reasonable that the offeree should notify the offeror if he does not
intend to accept.
Cases
Is There An Agreement?
(Acceptances, Deficient Agreements)
Imperfect Acceptance
o Counter offer: Implied rejection of original offer
Imperfect acceptance can also take form of acceptance with new condition of different or
additional terms, but CANNOT condition acceptance
o UCC 2-207 SEE ATTACHED
Dortman v. Aikman Co. (Carpet case w/ bad carpet)
Electronic Acceptances
o Shrink-Wrap
(1) When buying physical item, and the Ts and Cs are located in the box or shrinkwrapped to product
Opening or breaking the wrap constitutes acceptance
Glocek v. Gateway
o Click-wrap
When transacting online, and Ts and Cs must be accepted in order to download
Hancock v. American Telephone
o Browse-wrap
Click on notice brings users to another screen where the Ts and Cs can be found
Not required to click agree or even view terms.
Misunderstanding
Cases
Restatement 20
(1) There is no K if the misunderstanding concerns a material term and
a) neither party knows or has reason to know of the misunderstanding; or
b) each party knows or each party has reason to know the meaning, no K
(2) The manifestation of the parties are operative in accordance with the meaning
attached to them by one of the parties if
a) that party does not know of any different meaning attached by the other, and
the other knows the meaning attached by the first; or
b) that party has no reason to know of any different meaning attached by the
other, and the other has reason to know the meaning attached by the first party.
Is There An Agreement?
(Deficient Agreements)
Cases
Restatement 33 (Varney)
o Even though a manifestation of intention is intended to be understood as an
offer, it cannot be accepted so as to form a contract unless the terms of the
contract are reasonably certain
o The terms of a contract are reasonably certain if they provide a basis for
determining the existence of a breach and/or giving an appropriate remedy
o The fact that one or more terms of a proposed bargain are left open or
uncertain may show that a manifestation of intention is not intended to be
understood as an offer or as an acceptance
Restatement 32 (Moolenar)
o Contract is valid if it so definite in its terms that the performances to be rendered by each party are
reasonably certain
DEFAULT RULE SHOULD EMULATE WHAT THE OTHER PARTIES AT THE TIME THEy
ENTERED INTO THE K WOULD GACE SELECTED
EFFECTUATE INTENT OF PARTIES
o COURTS ASK WAS THERE INTENT TO BE BOUND?
If so, then set price at fair market balue
Varney v. Ditmars
o Architect was hired at $35/w, and requested $5 upgrade. was also to receive fair share of
profits. DISSENT: Although fair share was uncertain, the couldve produced evidence to
alleviate the uncertainty.
o Rule: For a contract to be valid, the agreement made must be definite and
explicit enough to permit the full intent of the parties to be ascertained with a
reasonable degree of certainty.
Community Design v. Antonell
Promised to pay any employee working by Christmas a bonus, but the exact amount was
undetermined. Antonell benefitted the Company so he was rightfully owed the bonus
o Rule: When determining whether a contract is unenforceable for want of
certainty, the court will look to whether the complaining party conferred a
benefit upon the party in breach.
Moolenar v. Co-Build
o Farmer who was promised a renegotiated rate based on fair market value.
Property was sold to
o Rule: A contract that omits an essential term can be enforceable if the
contract provides the means by which to ascertain the term with sufficient
certainty.
o
Considerations
(Bargain)
Cases
Consideration
(Moral Obligation)
Cases
Consideration
(Contemporary Applications & Promissory Estoppel)
Promissory Estoppel
o Black letter
When promisor intentionally causes promise to alter position for the worse on reliance of
the promise, without consideration, the promisor cannot escape enforcement
o Restatement 90
(1) A promise which the promisor should reasonable expct to induce action or
forbearance on the part of the promise and which does induce such action or
o
Cases
Ricketts v. Scothorn
o quit her job as a result of her Grandpa paying her. Gpa stated that he
didnt want his grandchildren to work.
o Rule: Equitable estoppel prevents a promisor from revoking an otherwise
unenforceable gratuitous promise if the promisee foreseeably and reasonably
relied on the promise to her detriment.
Pavel v. AS Johnson
o solicited bids for a job. bid with an error in the amount, and backed out after had already
been awarded the job. could only find another subcontractor for more $, and sued for the
difference. lost
o Rule: In the context of a construction contract, a promise by the subcontractor will only
create an enforceable obligation when the subcontractor made a clear and
definite promise that reasonably induced detrimental action on the part of the
general contractor.
McIntosh v. Murphy
o Employment in Hawaii where relied and moved there for the job
o Rule: An oral employment promise is enforceable, despite the Statute of
Frauds, if the injured party seriously changes his position in reliance on the
promise and failing to enforce the promise would result in unconscionable
injury.
Unenforceable Ks
(Fraud)
Is there an enforceable K or some other basis for enforcement?
Statute of frauds
o Certain categories of contracts that MUST be in writing to be considered enforceable
Writing does NOT have to be formal (offer letter, emails) as long as they include the deal
terms
Usually need a signature
o Restatement 110
Within statute of frauds NEEDS TO BE IN WRITING IF
Employment not to be performed w/in one year
Sale of land
o UCC 2-201
Sale of goods above $500
o Examples of not performed w/in one year
Example: Hired on 10/3 for one year contract and begin on 10/3 = not within
statute, could be an oral agreement
Hired on 10/3, begin on 10/4 = cannot be completed in one year from hiring
Cases
Misrepresentation
MisRep
Halpert v. Rosenthal
o Agent said there was no termite issue when there was. Buyer of the house won
o Rule: A party may rescind a contract due to an innocent, negligent, or
fraudulent material misrepresentation.
Swinton v. Whitinsville Savings
o Sellers were aware of termite infection and did not tell buyer. Seller wins
o Rule: A seller may not be held liable for the mere failure to disclose a defect in
the property of which he is aware and of which the buyer is unaware.
Weintraub v. Krobatsch
o Seller intentionally showed buyer property to cover up cockroach issue, and
seller made no representation about the defect. Buyer wins
o Rule: Even where a party has made no representation about the subject
matter of a contract, fraudulent concealment or nondisclosure of a material
fact may provide grounds for contract rescission where justice so requires.
Unenforceable Ks
(Capacity, Duress, Illegality, Public Policy)
Cases
Capacity
o Restatement 12
A natural person who manifests assent to a transaction has full legal capacity to incur
contractual duties unless
Under guardianship
Infant
Mentally ill, or defective, (not controlled w/ meds) or
Intoxicated (must be obvious)
Ratification: cant ratify the K, if for example, not of legal age when you enter K but
once you are legal age, you can act on K making it binding.
Ratification must be done expressly
Duress
o Restatement 174
If conduct that appears by a party who does not intend to engage in that conduct is
physically compelled by duress, the conduct is not effective as a manifestation of assent
o Restatement 175
(1) If a partys manifestation is induced by an improper threat by the other party that
leaves the victim no reasonable alternative, the contract is voidable
(2) Induced by one who is not party to transaction, contract is voidable by victim, unless
other party to transaction acts in good faith w/o reason to know of duress.
o Economic Duress
(1) One party involuntarily accepts terms of another
(2) Circumstances permit no other alternative
(3) Such circumstances were result of act of other party
Good faith v. bad faith (holdup, economic duress) (Alyeska)
Undue Influence
o Over-persuasion
Involves use of pressure to persuade party
Susceptibility of the weaker party, and overpersuasion over stronger party
Unenforceable Ks
(Public Policy, Unconscionability, Mistake)
Unconscionability
o Terms are so extremely unjust, or overwhelmingly one-sided in favor of party w/ superior power
o BLL: A contract must be procedurally and substantively unconscionable
Procedurally
Unfair Bargaining/Absence of Choice
Substantively
Unfair Contract Terms
If either one is blatantly obvious, the other is not required to be prove
o Restatement 208
o UCC 2-302
If the court as a matter of law find the contract or any clause of the contract to
have been unconscionable at the time it was made the court mat refuse to enforce
the contract, or it may enforce the remainder of the contract without the
unconscionable clause, or it may so limit the application of any unconscionable
clause as to avoid any unconscionable result
When it is claimed or appears to the court that the contract or any clause thereof
may be unconscionable the parties shall be afforded a reasonable opportunity to
present evidence as to its commercial setting, purpose and effect to aid the court
in making the determination.
o Williams v. Furniture (1)
K is enforceable, K must be read by party, but if cannot read or understand, they
are responsible for having someone who can
o Williams v. Furniture (2)
Williams had little bargaining power
Remanded for new trial
Mistake
o Modern: Just because one party may be unaware and assumes a risk, does not mean
the K should be unenforced
o Classic: If mistake goes to substance of a thing bargained for; no K
o Restatement 154
Party bears the risk of mistake when
A) The risk is allocated to him by agreement of the parties; or
B) He is aware, at the time the contract is made, that he has only limited
knowledge with respect to the facts to which the mistake related but
treats his limited knowledge as sufficient
C) The risk is allocated to him by the court on the ground that it is
reasonable in the circumstances to do so
o Mistake v. Misunderstanding
Misunderstanding
Two different interpretations of the same term
o VOIDABLE
Mistake
Both make wrong interpretation on same fact
o VOID (there is a difference between VOID and VOIDABLE)
Mistake of law:
o A + B make K guided on a false law in the jurisdiction; not
voidable
Ignorance of law is not an excuse
Mistake of Fact:
o
o
Cases
A sells infertile cow to B for $80. Cow is fertile and worth $1000
VOID
A found stone and sold it as topaz for $30 Stone turns out to be
diamond worth $7000 NOT VOID
Cases
the writing may not be varied or contradicted by evidence of any prior written
or oral agreement in the absence of fraud, duress, or mutual mistake.
Traders Bank
o $ for the dealership floor plan. Daddy came to the rescue of his son
o Rule: A promissory note maker has standing to assert a tort claim for fraud in
the inducement.
Parol Evidence
o MUST BE WRITTEN CONTRACT, NO ORAL AGREEMENT
Complete and e
o General Rule: When there is a final, written agreement, cant use pre-agreement representations
that were made before the final agreement was signed.
Merger Clauses
o Majority/Modern View: doesnt automatically make contract fully integrated contract, only goes to
pre-formation acts
o Minority/Classic: mere presence of a merger clause means courts cannot look at extrinsic evidence
Ambiguity
o BLL: Capable of more than one meaning when viewed objectively by a reasonably
intelligent person who has examined the content of the agreement
A court will decide if a term is ambiguous
o Restatement 214
Agreements and negotiations prior to or contemporaneous with the adoption of a writing
are admissible in evidence to establish
Cases
Cases
Contractual Excuses
(Conditions, Modifications)
Has either party ultimately failed to perform those terms?
Cases
Conditions precedent
o Non-occurrence of something K expressly provided must occur as an excuse for not doing what
you agreed to do.
on condition provided that
o Restatement 224
A condition is an event, not certain to occur, which must occur, unless its non-occurrence
is excused before performance
o Restatement 225
(1) Performance of a duty subject to a condition cannot become due unless the condition
occurs or its non-occurrence is excused
(2) Unless it has been excused, the non-occurrence of a condition discharges the duty
when the condition can no longer occur
(3) Non-occurrence of a condition is not a breach by a party unless he is under a duty that
the condition occur
Modifications
o UCC: can modify at any time, no consideration
o Restatement: Unless unanticipated event, a modification needs consideration
Restatement 229
o To the extent that the non-occurrence of a condition would cause disproportionate forfeiture, a
court may excuse the non-occurrence of that condition unless its occurrence was a material part od
the agreed exchange
Luttinger v. Rosen (FORMALISTIC APPROACH)
o was required to obtain a proper mortgage, but after due diligence could not secure a
mortgage. Sued for down payment back. won
o Rule: A condition precedent must be met before performance by the
parties is required under a contract, and the contract will not be
enforced if the condition is not met.
National Fuel v. Hartford Fire
o Surety bond with third party and condition that the third party is notified w/in a certain
time before paying out bond. did not give proper notice to satisfy condition precedent
o Rule: An express condition precedent must be literally performed or
satisfied before the other party is obliged to perform its obligations.
ACME v. Johnson
o Security transport, but didnt receive the receipt and therefore was not liabie for the
robbery. Question was whether the lack of receipt was material
Drake
o
o
Contractual Excuses
(Impossibility, Impracticability, Anticipatory Repudiation)
Impossibility (Traditional)
o Parties excused if performance is impossible
Impracticability (Modern)
o If a K is made, and performance is impractical, not by parties own fault, performance is excused
BLL/Restatment 261: After a K is made, if one partys performance is made impractical w/o fault by the
occurrence of an event, and the non-occurrence of the event was a basic assumption on which the K was
made, then the obligation to perform is discharged.
Frustration of Purpose
o BLL/Restatement 265
The frustration cannot be contemplated at the time of the K formation
If a partys principal purpose is frustrated by the occurrence of an unanticipated
event; and the non-occurrence of the event was a basic assumption upon which
the K was made; then that partys obligation to perform is discharged
UNLESS the parties language or other conduct indicate a different result
Cases
repudiation alone gives rise to a claim for damages for total breach.
Where performances are to be exchanged under an exchange of promises, one
partys repudiation of a duty to render performance discharges the other partys
remaining duties to render performance.
Taylor v. Caldwell
o Renting of the music hall that then burned down
o Rule: In contracts in which the performance depends on the continued
existence of a given person or thing, a condition is implied that the
impossibility of performance arising from the perishing or destruction of the
person or thing shall excuse the performance.
Route 6 v. Ruby Tuesday
o Claimed that b/c of 2008 crash they couldnt perform. Not true b/c they had
complete discretion with what they did with their $
o Rule: In order to use a force majeure clause as an excuse for nonperformance, the event alleged as an excuse must have been beyond the
partys control and not due to any fault or negligence by the non-performing
party.
Financial hardship is not grounds for avoiding performance
Mel Frank Tool v. Dichem
o Hazardous chemicals case where not ALL inventory was hazardous, so b/c city code prohibited
hazardous materials does not mean the can avoid performance
o Rule: A partys performance under a lease may not be excused when a law or
ordinance restrict use of the premises, but does not completely render the
premises unusable by the party.
Hochester v. De La Tour (Anticipatory Repudiation)
o K to be a courier, but employer decides before date of performance to not have him as an
employee
o Rule: If two parties enter into a contract to be performed at a designated time
in the future, and one party refuses to perform the contract before the
designated time the parties agreed to perform, the other party may sue
before the contract was to be performed. That party need not wait until the
time for performance has passed.
Contractual Excuses
(Material Breach)
Material Breach
o Common law v. Sale of Goods
Material breach in a common law concept excuses performance of other party
ONLY if breach is material
UCC takes perfect tender approach
Any breach by the seller will excuse buyer from performing (no substantial
performance)
If party does NOT 100% perform breach
o Restatement 237
Except as in 240, it is a condition of each partys remaining duties to render
performances to be exchanged under an exchange of promises that there be no
uncured material failure by the other party to render any such performance due at
an earlier time
o Restatement 241
Cases
Nichols v. Raynbred
o Cow for 50 schillings who performs first?
Rule: In a contract exchanging a promise for a promise, a party does not have
to perform before he can recover.
o NOTES: COURT APPLIED EARLY RULE WHICH HELD THAT IN AN
EXCHANGE OF PROMISES FOR A PROMISE, EACH PROMISE IS TREATED
AS INDEPENDENT OF THE OTHER. THEREFORE, EACH PARTY IS
ENTITLED TO SUE THE OTHER FOR NONPERFORMANCE
Kingston v. Preston
o Silk Merchant buying the business
o Rule: When one partys performance under a contract is dependent on the
prior performance of the other party, the other partys performance is a
condition precedent and performance will be excused unless the condition is
satisfied.
Brinton v. Turner
o K to perform one year of labor for $120. stopped performing at 9mos and did not pay at all
o Rule: If a party breaches, but had partially performed a special contract, he
may still be able to recover a reasonable sum for the service he has actually
performed.
Jacob & Youngs v. Kent
o Wrong pipe in the big house. Cant tear down the house. substantially performed and received
expectation damages for full performance minus the shitty pipe they installed
o Rule: A party who substantially performs its obligations under a contract is
entitled to expectation damages based on full performance of the contract,
minus an offset for defects in the partys performance.
Alaska v. Eagon Forest Products
o Log shipment that changed due to fluctuation in market that damaged the value of the K
o Rule: Under Article II of the Uniform Commercial Code (U.C.C.), only perfect
tender will satisfy a sales contract, and a buyer may reject delivery of goods
that do not conform exactly to the contract.
ESPN v. MLB
o ESPN had deal with MLB to show games. ESPN wanted to preempt those games with NFL, but
needed permission from MLB. No permission was granted so ESPN still preempted. MLB could
(1) elect to continue contract and sue for damages or (2) terminate K and sue for damages. MLB
continued 1998 season, but after same thing happened in 1999, MLB terminated
ELECTION OF REMEDIES:
(1) Continue and recover damages
(2) Terminate
o
Enforcing Ks/Damages
(Specific Performance, Liquidated Damages)
What remedies, if any, are available to the aggrieved party?
Efficient Breach: may be times when it is more economically efficient to breach and pay damages
o
o
o
o
Cases
Enforcing Ks/Damages
(Expectation)
Expectation Damages
o
o
Cases
Restatement 345
Injured party has a right to damages based on expectation interest
Restatement 347
Subject to the limitations stated in 350/353, the injured party has a right to damages
based on his expectation interest as measured by:
The loss in value (to the injured party) of the other partys performance caused
by its failure or deficiency, plus
Any other loss, including incidental or consequential loss, caused by the breach,
less
Any cost or other loss that (the injured party) has avoided by not having to
perform
Putting a party in the position it would be if the K was FULLY PERFORMED
Can calculate either
Replacement; OR
Loss in value
Remedies
(1) Purchase full performance
(2) Diminution in value
(3) DEFAULT: Pay and replace; UNLESS
the cost is WAY higher than the diminution in value (peevyhouse)
Hawkins v. Mcgee
o Hand that was operated on, but ended up growing hair Court could not put a value on a
perfectly good hand
Broke the warranty for a perfectly good hand
o Rule: When one party breaches a contract, the non-breaching party may
recover damages based on the difference between the value of the contract
as fully performed and the actual value of the non-breaching partys present
condition, plus any incidental damages reasonably foreseeable to all parties at
the time of contract formation.
Lewis Electric v. Miller
o substantially performed the K but did not pay. can recover unpaid K price minus what they
didnt perform
o Rule: Where a construction contractors performance is incomplete but
remedial, the contractor can recover the unpaid contract price minus the cost
of completing any unfinished work and remedying any defective work, plus
any other damages suffered by the owner, not to exceed the benefit actually
received by the owner.
Groves v. John Wunder Co.
o Gravel plant leased to who did not return it to its normal state because it wasnt worth it to them.
$60,000 to perform for a $12,000 value
Rule: Damages for willful breach of a construction contract, even where there
has been substantial performance are awarded as the cost of completing the
failed performance.
PeevyHouse
o Farm w/ coal that was leased to a mning co. who did not return land back to original state as
required. $29,000 for just a $300 dollar increase in value. gets $300
o Rule: when the contract provision breached is merely incidental to the main
purpose in view and where the economic benefit which would result to the
owner from full performance is grossly disproportionate to the cost of
performance, damages should instead be limited to the diminution in value
resulting to the premises because of the non-performance.
o
Cases
Avoided Cost
o If breach saves non-breaching party $, then expectancy analysis has to be reduced
Avoided Loss (Mitigation) (Parker v. 20th Century Fox)
o If non-breacher has opportunity to mitigate losses but fails, then court will reduce amount of loss
that could be prevented
o Restatement 350
(1) Except as stated in subsection (2), damages are not recoverable for loss that the
injured party could have avoided without undue risk, burden, or humiliation.
(2) The injured party is not precluded from recovery by the rule states in subsection (1) to
the extent that he has made reasonable but unsuccessful efforts to avoid loss
Foreseeability (Hadley v. Baxendale)
o Restatement 351
Consequential damages are recoverable if they reasonably follow from contract made, or
where there was explicit discussion that would put party on notice for expecting damages
Parker v. 20th Century Fox
o Actress who wanted one film that ended up not being produced. She was asked to do another that
was supposed to be the same. It wasnt.
o Rule: The measure of recovery by a wrongfully discharged employee is the amount of salary
agreed upon, less the amount which the employee has earned or with reasonable effort might have
earned from substantially similar employment.
Argentinis v. Gould
o gave a defective building, and didnt pay $43,000 to for performance. was double
compensated
o Rule: When a buyer receives a defective or incomplete building, any part of the
price that is as yet unpaid is deducted from the cost of completion that is
awarded to the buyer.
Hadley v. Baxendale
o Crank shaft was shipped negligently and claimed loss profits. The urgency for shipment to
avoid loss of damages was not communicated.
o Rule: When one party breaches a contract, the other party may recover all
damages that are reasonably foreseeable to both parties at the time of
making the contract, as well as damages stemming from any special
circumstances, provided those circumstances were communicated to and
known by all parties at contract formation.
ESPN v. MLB
o MLB did not show evidence of damages so they received nominal damages
Enforcing Ks/Damages
Cases
P has burden of proof and should present to court a proper basis for ascertaining the damages it seeks to
recover when seeking compensatory damages
When seeking damages for loss of goodwill, the P must not only prove the fact of loss w/ certainty, but the
loss must be reasonably certain in amount
o Damages may not be speculative or imaginary, must be reasonably certain and directly traceable to
the breach
Nominal damages:
o Awarded to a party that has not suffered substantial injury or loss for which he must be
compensated
Rest. 349: Damages based on Reliance Interest
o A P may recover damages based on his reliance interest, including expenditures made in
preparation for performance or in performance, less any loss that the party in breach can prove
with reasonable certainty the injured party would have suffered had the contract been performed
Reliance Damages:
o Put non-breacher back in position BEFORE they entered into contract. Reward damages based on
costs incurred based upon reliance on promise by breaching party
o Easier to prove, as money already spent (paper trail)
Restitution:
o Give the non-breaching party an amount equal to the benefit their performance conferred on the
breacher (i.e., disgorge amount by which unjustly enriched)
o Sometimes can exceed contract price
o Restatement 347:
Injured party has right to damages based on restitution interest, which is his interest in
having restored to him any benefit that he has conferred on the other party